Federal Register / Vol. 89, No. 32 / Thursday, February 15, 2024 / Rules and Regulations 11703 

State or other locality Regional office 

Colorado ................................................................................................................................................................................ Denver. 

Connecticut ............................................................................................................................................................................ Washington, DC. 

Delaware ................................................................................................................................................................................ Washington, DC. 

District of Columbia ............................................................................................................................................................... Washington, DC. 

Florida .................................................................................................................................................................................... Atlanta. 

Georgia .................................................................................................................................................................................. Atlanta. 

Hawaii and all land and water areas west of the continents of North and South America (except coastal islands) to 

long. 90 degrees East.

San Francisco. 

Idaho ...................................................................................................................................................................................... San Francisco. 

Illinois ..................................................................................................................................................................................... Chicago. 

Indiana ................................................................................................................................................................................... Chicago. 

Iowa ....................................................................................................................................................................................... Chicago. 

Kansas ................................................................................................................................................................................... Denver. 

Kentucky ................................................................................................................................................................................ Chicago. 

Louisiana ............................................................................................................................................................................... Atlanta. 

Maine ..................................................................................................................................................................................... Washington, DC. 

Maryland ................................................................................................................................................................................ Washington, DC. 

Massachusetts ....................................................................................................................................................................... Washington, DC. 

Michigan ................................................................................................................................................................................ Chicago. 

Minnesota .............................................................................................................................................................................. Chicago. 

Mississippi ............................................................................................................................................................................. Atlanta. 

Missouri ................................................................................................................................................................................. Chicago. 

Montana ................................................................................................................................................................................. Denver. 

Nebraska ............................................................................................................................................................................... Denver. 

Nevada .................................................................................................................................................................................. San Francisco. 

New Hampshire ..................................................................................................................................................................... Washington, DC. 

New Jersey ............................................................................................................................................................................ Washington, DC. 

New Mexico ........................................................................................................................................................................... Denver. 

New York ............................................................................................................................................................................... Washington, DC. 

North Carolina ....................................................................................................................................................................... Atlanta. 

North Dakota ......................................................................................................................................................................... Chicago. 

Ohio ....................................................................................................................................................................................... Chicago. 

Oklahoma .............................................................................................................................................................................. Denver. 

Oregon ................................................................................................................................................................................... San Francisco. 

Pennsylvania ......................................................................................................................................................................... Washington, DC. 

Puerto Rico and coastal islands ............................................................................................................................................ Chicago. 

Rhode Island ......................................................................................................................................................................... Washington, DC. 

South Carolina ....................................................................................................................................................................... Atlanta. 

South Dakota ......................................................................................................................................................................... Chicago. 

Tennessee ............................................................................................................................................................................. Chicago. 

Texas ..................................................................................................................................................................................... Denver. 

Utah ....................................................................................................................................................................................... Denver. 

Vermont ................................................................................................................................................................................. Washington, DC. 

Virginia ................................................................................................................................................................................... Washington, DC. 

Washington ............................................................................................................................................................................ San Francisco. 

West Virginia ......................................................................................................................................................................... Washington, DC. 

Wisconsin .............................................................................................................................................................................. Chicago. 

Wyoming ................................................................................................................................................................................ Denver. 

Virgin Islands ......................................................................................................................................................................... Atlanta. 

Panama/limited FLRA jurisdiction ......................................................................................................................................... Atlanta. 

All land and water areas east of the continents of North and South America to long. 90 degrees East, except the Virgin 

Islands, Panama, Puerto Rico and coastal islands.

Washington, DC. 

Approved: February 8, 2024. 

Thomas Tso, 

Solicitor and Federal Register Liaison, Federal 

Labor Relations Authority. 

[FR Doc. 2024–02912 Filed 2–14–24; 8:45 am] 

BILLING CODE 7627–01–P 

SMALL BUSINESS ADMINISTRATION 

13 CFR Parts 115 and 121 

RIN 3245–AG16 

Small Business Size Standards: 

Adjustment of Alternative Size 

Standard for SBA’s 7(a) and CDC/504 

Loan Programs for Inflation; and 

Surety Bond Limits: Adjustments for 

Inflation 

AGENCY: U.S. Small Business 

Administration. 

ACTION: Final rule. 

SUMMARY: This rule finalizes, without 

change, the U.S. Small Business 

Administration’s (SBA or Agency) July 

28, 2023, proposed rule to adopt the 

current statutory alternative size 

standard for its 7(a) Business and 

Certified Development Company (CDC/ 

504) Loan Programs (collectively 

‘‘Business Loan Programs’’), subject to a 

34.46 percent adjustment for inflation 

that has occurred since the 

establishment of the statutory 

alternative size standard in 2010. The 

inflation adjustment would increase the 

size standard’s level for tangible net 

worth to $20 million and for net income 

to $6.5 million. SBA also is adjusting for 


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11704 Federal Register / Vol. 89, No. 32 / Thursday, February 15, 2024 / Rules and Regulations 

1Small Business Size Standards: Inflation 

Adjustment to Monetary Based Size Standards 

(Interim Final Rule) (79 FR 33647; June 12, 2014), 

finalized on January 25, 2016 (81 FR 3949); Small 

Business Size Standards: Adjustment of MonetaryBased Size Standards for Inflation (Interim Final 

Rule) (84 FR 34261; July 18, 2019), finalized on 

November 17, 2022 (87 FR 69118); Small Business 

Size Standards: Adjustment of Monetary-Based Size 

Standards, Disadvantage Thresholds, and 8(a) 

Eligibility Thresholds for Inflation (Joint Final and 

Interim Rule) (87 FR 69118; November 17, 2022). 

inflation the applicable statutory limits 

for contract size under the Surety Bond 

Guarantee (SBG) Program. The 

adjustment increases the contract limit 

to $9 million and the contract limit for 

Federal contracts if a Federal 

contracting officer certifies that such a 

guarantee is necessary to $14 million. 

DATES: This rule is effective March 18, 

2024. 

FOR FURTHER INFORMATION CONTACT: 

Khem Sharma, Ph.D., Chief, Office of 

Size Standards, (202) 205–6618, 

sizestandards@sba.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background for Small Business Size 

Standards 

To determine eligibility for Federal 

small business assistance, SBA 

establishes small business size 

definitions (usually referred to as ‘‘size 

standards’’) for private sector industries 

in the United States. SBA uses two 

primary measures of business size for 

size standards purposes: average annual 

receipts over the last several years 

(either three years or five years for SBA 

financial assistance programs) and 

average number of employees over the 

last 24 months. SBA uses assets for 

certain financial industries and refining 

capacity, in addition to employees, for 

the petroleum refining industry to 

measure business size. In addition, 

SBA’s Small Business Investment 

Company (SBIC), Certified Development 

Company (CDC/504), and 7(a) Loan 

Programs use either the industry-based 

size standards or tangible net worth and 

net income-based alternative size 

standards to determine eligibility for 

those programs. 

SBA reviews small business size 

standards and makes necessary 

adjustments to them for three reasons: 

(i) changes in industry structure and 

Federal market conditions under the 

Small Business Jobs Act of 2010 (Jobs 

Act), Public Law 111–240, section 1344, 

Sep. 27, 2010; (ii) inflation in 

accordance with 13 CFR 121.102(c); and 

(iii) adoption of the latest North 

American Industry Classification 

System (NAICS) revision by the Office 

of Management and Budget. Updating 

size standards based on inflation—in 

addition to updating size standards 

based on the latest industry and Federal 

contracting data under the five-year 

rolling review—not only satisfies the 

Jobs Act’s mandate that SBA review all 

size standards every five years, but also 

is consistent with Executive Order 

13563 on improving regulation and 

regulatory review. 

Although SBA is required to assess 

the impact of inflation on its monetarybased size standards at least once every 

five years (67 FR 3041; January 23, 

2002) (13 CFR 121.102(c)), SBA may 

modify the timing of its adjustments to 

size standards and consider adjustments 

even more frequently than five-year 

intervals based on the prevailing 

economic conditions and the important 

policy objective of maintaining the 

value of size standards in inflationadjusted terms. 

II. Background on Alternative Size 

Standards 

Section 1116 of the Jobs Act added a 

new Section 3(a)(5) to the Small 

Business Act that directed SBA to 

establish an alternative size standard 

using maximum tangible net worth and 

average net income for applicants of the 

SBA’s 7(a) Business and CDC/504 Loan 

Programs (collectively ‘‘Business Loan 

Programs’’). The Jobs Act also 

established for applicants for the SBA’s 

Business Loan Programs an interim 

alternative size standard of not more 

than $15 million in tangible net worth 

and of not more than $5 million in the 

average net income after Federal income 

taxes (excluding any carry-over losses) 

of the applicant for the two full fiscal 

years before the date of the application 

(referred to as ‘‘Interim Rule’’). Under 

the Jobs Act, this interim statutory 

alternative size standard would remain 

in effect until SBA established a new 

alternative size standard for the 

Business Loan Programs through 

rulemaking. 15 U.S.C. 632(a)(5). Prior to 

that, SBA had a lower regulatory 

alternative size standard that applied to 

the CDC/504 Loan Program and applied 

temporarily to the 7(a) Loan Program for 

the period beginning on May 5, 2009, 

and ending on September 30, 2010. 13 

CFR 120.301(b)(2). 

On September 29, 2010, SBA issued 

Information Notice 5000–1175 

(available at https://www.sba.gov/sites/ 

default/files/files/bank_5000-1175_

0.pdf) providing that, effective 

September 27, 2010, the new statutory 

alternative size standard applied to its 

Business Loan Programs, thereby 

replacing and superseding the lower 

existing alternative size standard of $8.5 

million in tangible net worth and $3 

million in average net income, as set 

forth in 13 CFR 121.301(b)(2). The 

Information Notice further stated that 

the new statutory alternative size 

standard would remain in effect until 

SBA established a permanent alternative 

size standard for the Business Loan 

Programs through rulemaking. 

In accordance with its regulations, 

SBA is required to assess the impact of 

inflation on its monetary-based size 

standards at least once every five years 

(67 FR 3041; January 23, 2002) and 13 

CFR 121.102(c)). Accordingly, except for 

the statutory alternative size standard 

for the SBA Business Loan Programs, 

SBA adjusted its monetary-based size 

standards for inflation three times since 

the Congress enacted the Interim Rule in 

2010.1 In its rulemaking for each 

adjustment, SBA provided that the 

statutorily set alternative size standard 

would remain in effect until SBA 

established a permanent alternative size 

standard for the 7(a) and CDC/504 Loan 

Programs. 

To move toward codifying a 

permanent alternative size standard, in 

March 2018, SBA published in the 

Federal Register an advanced notice of 

proposed rulemaking (ANPRM) seeking 

public input to assist in establishing a 

permanent alternative size standard for 

its 7(a) and CDC/504 Loan Programs (83 

FR 12506; March 22, 2018). SBA also 

invited suggestions on sources of 

relevant data and information that SBA 

should evaluate in developing a 

permanent alternative size standard and 

in assessing its impact. SBA received a 

total of 34 comments on the ANPRM, of 

which 11 were found to be not pertinent 

to the scope of the ANPRM. Of the 23 

comments that were pertinent, all 23 not 

only supported the statutory alternative 

size standard, but also recommended 

making it the permanent alternative size 

standard for the SBA’s 7(a) and CDC/ 

504 Loan Programs. 

On July 28, 2023, SBA issued a 

proposed rule to adopt the current 

statutory alternative size standard for its 

Business Loan Programs, subject to a 

34.46 percent adjustment for inflation 

that has occurred since the 

establishment of the statutory 

alternative size standard in 2010 (88 FR 

48739). As described in the July 2023 

proposed rule, the inflation that has 

occurred since 2010 has eroded the 

value of the alternative size standard in 

real terms. SBA has an important policy 

objective of maintaining the value of 

monetary-based size standards in real 

(i.e., inflation-adjusted) terms, and by 

adjusting the statutory alternative size 

standard for inflation, SBA is fulfilling 

that objective. SBA used the inflation 

adjustment methodology it describes in 

its ‘‘Size Standards Methodology’’ white 


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Federal Register / Vol. 89, No. 32 / Thursday, February 15, 2024 / Rules and Regulations 11705 

2A surety bond is a three-party instrument 

between a surety, a contractor, and a project owner. 

The agreement binds the contractor to comply with 

the contract’s terms and conditions. If the 

contractor is unable to successfully perform the 

contract, the surety assumes the contractor’s 

responsibilities and ensures that the project is 

completed. The surety bonds reduce the risk of 

contracting. Surety bonds are viewed as a means to 

encourage project owners to contract with small 

businesses that may not have the credit history or 

prior experience of larger businesses and are 

considered to be at greater risk of failing to comply 

with the contract’s terms and conditions. 

3Also see a July 8, 2022, Congressional Research 

Service Report on ‘‘SBA Surety Bond Guarantee 

Program,’’ available at https://

crsreports.congress.gov/product/pdf/R/R42037. 

4Section 508 of the American Recovery and 

Reinvestment Act of 2009 (ARRA) (Pub. L. 111–5; 

Feb 17, 2009) temporarily increased, from February 

17, 2009, through September 30, 2010, the 

maximum bond amount from $2 million to $5 

million. The act also authorized the SBA to 

guarantee a bond of up to $10 million for Federal 

contracts if a Federal contracting officer certified 

that such a guarantee was necessary. Using its 

rulemaking authority, SBA made ARRA’s temporary 

size standard permanent on August 11, 2010 (76 FR 

48549). 

paper, available at www.sba.gov/size, to 

adjust the statutory alternative size 

standard for inflation. SBA applied the 

same methodology in its previous 

inflation adjustments to other monetary 

based size standards, including the 

latest inflation adjustment in 2022 (87 

FR 69118; November 17, 2022). The 

proposed inflation adjustment increased 

the tangible net worth component of the 

alternative size standard to $20 million 

and the net income component to $6.5 

million. 

III. Background for Surety Bond 

Contract Limits 

In SBA’s July 2023 proposed rule, 

SBA also proposed amending the 

contract limits applicable to its Surety 

Bond Guarantee (SBG) Program. The 

SBG Program is designed to increase 

small business access to Federal, state, 

and local government contracting, as 

well as private-sector contracting, by 

guaranteeing bid, payment, and 

performance bonds on contracts for 

small and emerging contractors who 

cannot obtain surety bonds through 

regular commercial channels.2 Surety 

bonds are important to small businesses 

interested in competing for Federal 

contracts because the Federal 

Government requires prime contractors, 

prior to the award of a Federal contract 

exceeding $150,000 for the construction, 

alteration, or repair of any building or 

public work of the United States, to 

furnish a performance bond issued by a 

surety satisfactory to the officer 

awarding the contract in an amount the 

contracting officer considers adequate to 

protect the government. SBA’s 

guarantee gives sureties an incentive to 

provide bonding for small businesses 

and thereby assists small businesses in 

obtaining greater access to contracting 

opportunities. SBA’s guarantee is an 

agreement between a surety and SBA 

that SBA will assume a certain 

percentage of the surety’s loss should a 

contractor default on the underlying 

contract. The SBA’s guarantee currently 

ranges from 80 percent to 90 percent of 

the surety’s loss if a default occurs. For 

more information about SBA’s SBG 

Program, see https://www.sba.gov/ 

funding-programs/surety-bonds.3

Section 1695 of the National Defense 

Authorization Act for Fiscal Year 2013 

(NDAA 2013 or Act) (Pub. L. 112–239; 

January 2, 2013) increased the SBG 

guarantee limit to $6.5 million, and up 

to $10 million for a Federal contract if 

a Federal contracting officer certifies 

that such a guarantee is necessary.4 The 

Act also included a provision to 

increase the $6.5 million limit 

periodically for inflation in accordance 

with 41 U.S.C. 1908. 41 U.S.C. 1908 

provides that inflation adjustments for 

acquisition-related dollar thresholds are 

to be set by the Federal Acquisition 

Regulatory Council (FAR Council). It 

also requires that the Consumer Price 

Index (CPI) be used to measure 

inflation. The FAR Council is 

established under 41 U.S.C. 1302 to 

assist in the direction and coordination 

of procurement policy and regulatory 

activities for the Federal Government. 

The FAR Council is required to adjust 

for inflation the acquisition-related 

dollar thresholds every five years. Based 

on CPI, inflation has increased more 

than 30 percent since 2013. This has 

eroded the value of the bonding limits 

in real terms since the limits were set by 

Congress in 2013. 

SBA has an important statutory 

requirement to adjust the bonding limits 

in accordance with CPI and the FAR 

Council. The current limits are $6.5 

million and, for Federal contracts if a 

Federal agency certifies that a greater 

amount is necessary, $10 million. SBA 

has not adjusted its bonding limits since 

2013. The FAR Council has not set a 

specific threshold in the Federal 

Acquisition Regulations (FAR) for SBA 

bonding limits. The FAR Council 

adjusts the acquisition-related dollar 

thresholds every five years with the last 

adjustments occurring in 2015 and 

2020. The FAR Council had a $6.5 

million threshold in effect in 2013 when 

the SBA bonding limits were set. In 

2015, as part of inflationary adjustments 

to the acquisition-related dollar 

thresholds, the FAR Council increased 

the $6.5 million threshold to $7 million 

(80 FR 38293; July 2, 2015). Likewise, in 

2020, the FAR Council adjusted $7 

million threshold to $7.5 million (85 FR 

62485; October 2, 2020). The FAR did 

not have a $10 million threshold in 

effect in 2013. 

As described in the July 2023 

proposed rule, in absence of a specific 

FAR threshold for SBA bonding limits, 

SBA proposed to follow the FAR 

adjustment from $6.5 million to $7.5 

million in 2020 and then calculate an 

adjustment from 2020 to 2023 using the 

same CPI methodology. SBA also 

proposed to adjust the existing limit of 

$10 million to maintain the same 

percentage spread (the lower limit is 65 

percent of the upper limit). As 

explained in the July 2023 proposed 

rule, by adjusting both limits at the 

same time, SBA maintains the 

effectiveness of the necessity provision 

and avoids the upper limit becoming 

meaningless. If only the lower limit 

were adjusted, then at some point it will 

exceed the necessity limit due to 

inflation. Thus, SBA’s actions fulfill the 

statutory objective of maintaining the 

value of monetary-based bonding limits 

in real (i.e., inflation-adjusted) terms. 

IV. Summary and Discussion of Public 

Comments Received on the July 2023 

Proposed Rule 

SBA’s July 2023 proposed rule invited 

public comments on SBA’s proposed 

changes generally, and on a variety of 

specific issues, including the 

appropriateness of applying SBA’s size 

standards methodology for inflation 

adjustments to the statutory alternative 

size standard, whether the inflationadjusted level of the interim statutory 

alternative size standard is appropriate 

as a new permanent alternative size 

standard under the current credit 

environment, the impact of using the 

statutory alternative size standard as the 

permanent alternative size standard on 

small businesses seeking loans through 

its Business Loan Programs, and the 

appropriateness of SBA’s proposed 

methodology for adjusting statutory 

contract limits for its SBG Program, 

especially on SBA’s approach to adjust 

the $10 million contract limit for 

Federal contracts. 

SBA received 13 comments on the 

proposed rule from various trade 

associations, businesses, and individual 

stakeholders, of which 11 comments 

supported SBA’s proposed changes and 

two comments were not applicable or 

were outside the scope of SBA’s 

proposed rule. Generally, commenters 

expressed strong support for SBA’s 

proposed changes without reservation. 

Of the 11 comments pertinent to the 

proposed rule, SBA received three 


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11706 Federal Register / Vol. 89, No. 32 / Thursday, February 15, 2024 / Rules and Regulations 

comments from national trade 

associations, each separately 

representing surety bond producers, 

certified development companies 

(CDCs), and lenders participating in 

SBA’s 7(a) business loan program. These 

commenters expressed support for 

SBA’s proposed rule on the grounds that 

SBA’s changes would ultimately expand 

access for small businesses to financial 

assistance and other resources. For 

example, the national association 

representing surety bond producers 

expressed that SBA’s proposal to adjust 

for inflation the statutory limits for 

contract size under the SBG Program 

would allow more small and emerging 

contractors to grow their businesses by 

obtaining bonding to bid on public 

construction projects. 

The national association representing 

CDCs supported SBA’s proposal to 

adopt the statutory alternative size 

standard of $15 million in tangible net 

worth and $5 million in net income as 

the permanent alternative size standard, 

subject to SBA’s proposed inflation 

adjustment. This commenter petitioned 

SBA to further adjust the alternative size 

standard for inflation on the same fiveyear schedule that SBA currently uses 

for reviewing its monetary-based 

industry size standards. Moreover, the 

commenter expressed general support 

for continuing to allow small businesses 

to qualify for SBA financial assistance 

using either the alternative size standard 

or the industry size standard to ensure 

that as many small businesses as 

possible have access to SBA programs. 

The commenter further explained that 

the alternative size standard is 

particularly helpful for CDCs who may 

find it is easier to use it rather than the 

industry-based size standards due to the 

alternative size standard’s consistency 

across all industries. 

The national association representing 

lenders participating in SBA’s 7(a) 

business loan program also expressed 

support for continued use of alternative 

size standards for 7(a) and 504 loan 

eligibility, explaining that the 

alternative size standard simplifies the 

size determination process for lenders 

since it relies on financial information 

that is readily available from the loan 

applicant. This commenter also 

supported SBA’s proposal to make the 

interim alternative size standard 

permanent while adjusting it for 

inflation. The commenter petitioned 

SBA to adjust the alternative size 

standard on a periodic five-year basis 

going forward to assure that inflation 

does not erode the tangible net worth 

and net income monetary maximums. 

The remaining eight pertinent 

comments were from individual 

stakeholders and businesses, including 

five CDCs, which supported various 

aspects of SBA’s proposed rule. Three 

individual stakeholders expressed 

general support for SBA’s changes to the 

bonding thresholds or alternative size 

standard. The 5 CDCs expressed support 

for SBA’s proposed inflation-adjusted 

alternative size standard on the basis 

that the higher levels would ensure that 

small businesses would remain eligible 

for SBA financial assistance in an 

environment of increasing bank 

conservatism, high inflation and soaring 

interest rates. Four of the CDCs 

specifically expressed support for 

adopting the inflation adjusted statutory 

threshold as the permanent threshold 

and further recommended that SBA 

adjust the alternative size standard for 

inflation on a periodic basis not to 

exceed every five years. 

SBA Response 

SBA agrees with commenters that its 

proposed changes would allow more 

small businesses to access SBA 

programs and financial assistance. As 

explained in the July 2023 proposed 

rule, this rule will apply to more than 

8.1 million employer firms, of which 

98.2 percent are small under industrybased size standards and 92.5 percent 

are small under the interim statutory 

alternative size standard. SBA estimates 

that about 6,275 firms that are above the 

interim statutory alternate size standard 

will qualify as small under the inflationadjusted size alternative standard. 

While SBA cannot precisely estimate 

the number of businesses that are 

approved under the alternative size 

standard for 7(a) or CDC/504 loans and 

the number of newly-defined small 

businesses that will qualify under the 

inflation-adjusted alternative size 

standard for loans under these programs 

due to data limitations, based on the 

analysis of the available data for fiscal 

years 2021–2022, SBA estimates that at 

least 500 7(a) or CDC/504 loans (or 0.4 

percent of total loans) will likely be 

approved under the alternative size 

standard that otherwise would not have 

qualified under the industry-based size 

standard. Likewise, with respect to the 

SBG Program, under the rule, SBA 

estimates that more small businesses 

will qualify to apply for surety bonds as 

a result of the proposed increases to 

statutory bonding limits. 

SBA also agrees with commenters that 

using the alternative size standard has 

benefitted lenders in terms of 

simplifying and streamlining the loan 

application process and has reduced 

burden on applicants by providing an 

alternative method to establish 

eligibility for SBA financial assistance 

which would otherwise require 

businesses to keep three years or 

potentially five years of data to establish 

eligibility using industry-based size 

standards. Thus, SBA continues to 

support the use of alternative size 

standards for use in its Business Loan 

programs. 

As explained in the July 2023 

proposed rule, SBA believes its changes 

to the alternative size standard will 

allow more businesses to gain eligibility 

for SBA’s Business Loan Programs for 

which they would not otherwise be 

eligible based on their industry-specific 

size standards. SBA’s changes to the 

SBG statutory contract limits will 

provide greater access to contracting 

opportunities for small businesses. 

Thus, SBA’s changes will allow these 

additional businesses to attain SBA 

assistance that may be critical to their 

continued growth or economic viability. 

V. Conclusion 

With due consideration of all public 

comments, as discussed above, and in 

light of the overall strong support for 

SBA’s proposed changes and 

anticipated impacts, SBA is adopting 

the proposed adjustments in the July 

2023 proposed rule without change. 

SBA’s adoption of the proposed changes 

provides assurances to the public that 

the Agency is monitoring inflation to 

determine whether to adjust size 

standards and other monetary 

thresholds within a reasonable period. 

SBA’s adoption of the proposed changes 

also ensures that the thresholds 

applicable to the Business Loan 

Programs and SBG Program are up-todate and appropriate for the respective 

intended beneficiaries of the programs. 

Given the current developments in the 

U.S. economy, SBA will continue to 

monitor the inflation and other 

economic indicators and their impacts 

on size standards and adjust size 

standards, as needed. SBA will adjust 

the levels for inflation on the same fiveyear schedule that SBA currently uses 

for reviewing its monetary-based 

industry size standards in accordance 

with 13 CFR 121.102(c). 

Specifically, SBA is adopting the 

statutory alternative size standard of $15 

million in tangible net worth and $5 

million in net income as the permanent 

alternative size standard, subject to 

adjustment for inflation that has 

occurred since the establishment of the 

statutory alternative size standard in 

2010. The inflation adjustment increases 

the size standard’s level for tangible net 

worth to $20 million and for net income 

to $6.5 million. SBA is also adopting, as 

proposed, the inflation-adjusted 

thresholds applicable to the statutory 


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Federal Register / Vol. 89, No. 32 / Thursday, February 15, 2024 / Rules and Regulations 11707 

limits for contract size under the SBG 

Program. The adjustment increases the 

contract limit to $9 million and to $14 

million for Federal contracts if a Federal 

contracting officer certifies that such a 

guarantee is necessary. The statutory 

responsibility for adjusting the size 

standard for inflation lies with the 

Federal Acquisition Regulation. In the 

absence of FAR action, SBA will adjust 

the SBG contract limits on the same 

five-year schedule that SBA currently 

uses for reviewing its monetary-based 

industry size standards in accordance 

with 13 CFR 121.102(c). 

As required under 13 CFR 121.102(e), 

SBA advises readers that interested 

eligible parties may file a petition for 

reconsideration of a revised, modified, 

or established size standard at SBA’s 

Office of Hearings and Appeals (OHA) 

within 30 calendar days after 

publication of this final rule in 

accordance with 15 U.S.C. 632(a)(9) and 

13 CFR 134 Subpart I. You may reach 

OHA using the following contact 

information: by mail at U.S. Small 

Business Administration, Office of 

Hearings and Appeals, 409 Third St. 

SW, Eighth Floor, Washington, DC 

20416, by email at ohafilings@sba.gov, 

by phone: 202–401–8200 TTY/TRS: 711, 

or by fax at (202) 205–7059. 

VI. Compliance With Executive Order 

12866, the Congressional Review Act (5 

U.S.C. 801–808), the Regulatory 

Flexibility Act (5 U.S.C. 601–612), 

Executive Orders 13563, 12988, and 

13132, and the Paperwork Reduction 

Act (44 U.S.C., Ch. 35) 

Executive Order 12866 

The Office of Management and Budget 

(OMB) has determined that this final 

rule is a significant regulatory action for 

purposes of Executive Order 12866. 

This rule affects applicants for SBA’s 

7(a) Business and CDC/504 Loan 

Programs and businesses and sureties 

that use the SBG Program. To help 

explain the need for this rule and the 

rule’s potential benefits and costs, SBA 

is providing below a Regulatory Impact 

Analysis for this rule. 

Regulatory Impact Analysis 

1. What is the need for this regulatory 

action? 

SBA is required by the Jobs Act to 

adopt an alternative size standard based 

on tangible net worth and net income 

after taxes for its 7(a) and CDC/504 Loan 

Programs. SBA believes that adopting an 

alternative size standard is in the best 

interests of small businesses seeking 

SBA’s financial assistance. SBA’s 

mission is to aid and assist small 

businesses through a variety of 

financial, procurement, business 

development, and counseling programs. 

To assist the intended beneficiaries of 

these programs effectively, SBA 

establishes distinct definitions (usually 

referred to as ‘‘size standards’’) to 

determine which businesses are deemed 

small businesses. One of the SBA’s 

missions has been to provide necessary 

financing to small businesses that are 

not able to obtain loans in the 

commercial market in reasonable terms. 

Many businesses that have exceeded 

their industry-based size standards 

cannot grow and support their 

employees without additional capital 

from SBA’s financial assistance 

programs. The alternative size standard 

established by Congress assisted some 

small businesses that could not have 

otherwise qualified under their 

industry-based size standards. 

SBA is required to assess the impact 

of inflation on its monetary-based size 

standards at least once every five years 

(67 FR 3041 (January 23, 2002) and 13 

CFR 121.102(c)). Inflation, as measured 

by the change in GDP price index, has 

increased more than 34 percent from the 

enactment of the interim statutory 

alternative size standard in 2010. 

Inflation has caused the statutory 

alternative size standard to decrease in 

real terms, thereby forcing some 

businesses to lose small business status 

and eligibility for SBA’s Business Loan 

Programs. As stated previously, SBA 

adjusted its monetary size standards 

three times since the establishment of 

the statutory alternative size standard in 

2010, but the Agency did not adjust the 

statutory alternative size standard for 

SBA’s Business Loan Programs. SBA has 

an important policy objective of 

maintaining the value of monetarybased size standards in real (i.e., 

inflation-adjusted) terms, and by 

adjusting the statutory alternative size 

standard for inflation this rulemaking 

fulfils that objective. 

The Small Business Act delegates to 

SBA’s Administrator responsibility for 

establishing definitions for small 

business. The Act requires that small 

business definitions vary to reflect 

industry differences. 15 U.S.C. 632(a). 

Some businesses in need of financial 

assistance from SBA’s 7(a) and CDC/504 

Loan Programs may exceed the 

applicable size standard for their 

industries. The alternative size 

standard, in addition to the industrybased size standards, would apply 

uniformly across all industries and 

expand credit opportunities to 

businesses that are in need of SBA’s 

financial assistance. The inflationary 

adjustment of the statutory alternative 

size standard would not affect existing 

industry-based size standards but rather 

would supplement them and make 

financing available to otherwise eligible 

applicants that exceed their industrybased size standards. 

NDAA 2013 increased the SBG 

guarantee limit to $6.5 million, and up 

to $10 million for a Federal contract if 

a Federal contracting officer certifies 

that such a guarantee is necessary. The 

act also included a provision to increase 

the $6.5 million limit periodically for 

inflation in accordance with 41 U.S.C. 

1908. Based on the CPI, inflation has 

increased more than 30 percent since 

2013. SBA has not adjusted its bonding 

limits since 2013. This has eroded the 

value of the bonding limits in real terms 

since the limits were set by Congress in 

2013. The adjustment of the SBG 

contract limits will bring them in line 

with ongoing inflation and current 

contracting trends and increase 

contracting opportunities to small 

businesses. 

2. What are the potential benefits and 

costs of this regulatory action? 

The most significant benefit of this 

regulatory action for businesses is that 

certain businesses, especially in 

industries with receipts-based size 

standards, will gain eligibility for SBA’s 

Business Loan Programs for which they 

would not otherwise be eligible based 

on their industry-specific size 

standards. This will allow them to attain 

financing that may be critical to their 

continued growth or economic viability. 

Table 1, Comparison Between 

Industry-Based and Inflation-Adjusted 

Statutory Alternative Size Standard (FY 

2021–2022), compares the percentages 

of industries that have higher industrybased size standards relative to 

inflation-adjusted statutory size 

standard by type of size standard. For 

nearly 96 percent of industries with 

receipts-based size standards, the 

inflation-adjusted alternative size 

standard is found to be, in relative 

terms, higher than the industry-based 

size standards, thereby allowing 

businesses exceeding industry-based 

size standards in those industries to 

qualify for 7(a) and CDC/504 Loan 

Programs under the inflation-adjusted 

alternative size standard. The 

corresponding figure for the interim 

statutory alternative size standard is 

nearly 93 percent. On the other hand, 

for 77 percent of industries with 

employee-based size standards, 

industry-based size standards are, in 

relative terms, higher than the inflationadjusted alternative size standard. That 

figure for the interim statutory 

alternative size standard is 82.5 percent. 

This suggests that the alternative size 


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standard provides more benefits to 

businesses in the receipts-based 

industries than those with employeebased size standards. The higher 

inflation-adjusted alternative size 

standard will continue to help 

businesses above the industry-based 

size standards to receive SBA’s 

financing. 

TABLE 1—COMPARISON BETWEEN INDUSTRY-BASED AND INFLATION-ADJUSTED ALTERNATIVE SIZE STANDARD

[FY 2021–2022] 

Size standard type 

Whether industry size standard is 

higher or lower than interim statutory 

alternative standard (Table 11) 

Whether industry size standard is 

higher or lower than inflation-adjusted 

statutory alternative standard Total 

Higher Lower Higher Lower 

Employee-based .................................... 392 (82.5%) 83 (17.5%) 366 (77.1%) 109 (22.9%) 475 (100.0%) 

Receipts-based ...................................... 35 (7.3%) 445 (92.7%) 20 (4.2%) 460 (95.8%) 480 (100.0%) 

Total ................................................ 427 (44.7%) 528 (55.3%) 386 (40.4%) 569 (59.6%) 955 (100.0%) 

Table 2, Comparison Between 

Industry-Based and Inflation-Adjusted 

Statutory Alternative Size Standards by 

Sector (FY 2021–2022), shows by sector 

the impacts of inflation adjustment to 

the statutory alternative size standard 

on proportions of industries for which 

industry-based size standards are higher 

than the inflation-adjusted alternative 

size standard. Compared to the interim 

statutory alternative size standard, the 

proportions of industries for which 

alternative size standard is higher than 

the industry-based size standards are 

higher under the inflation-adjusted 

alternative size standard, especially for 

industries with employee-based size 

standards. For example, for just 7.8 

percent of industries in manufacturing, 

the statutory size alternative size 

standard is higher than the industrybased size standards. That figure 

increases to 13.3 percent under the 

inflation-adjusted size standard. 

Another example is wholesale trade, 

where percentage of industries for 

which the statutory alternative size 

standard is higher than the industrybased size standard increases from 

about 68 percent under the statutory 

alternative size standard to about 78 

percent under the inflation-adjusted 

alternative size standard. 

TABLE 2—COMPARISON BETWEEN INDUSTRY-BASED AND INFLATION-ADJUSTED STATUTORY ALTERNATIVE SIZE

STANDARDS BY SECTOR

[FY 2021–2022] 

Sector code Sector title 

Whether industry size standard is 

higher or lower than interim statutory 

alternative standard 

(Table 12) 

Whether industry size standard is 

higher or lower than inflation-adjusted 

statutory alternative standard Total 

Higher Lower Higher Lower 

11 .......................................... Agriculture, Forestry, Fishing 

and Hunting.

0 (0.0%) 63 (100.0%) 0 (0.0%) 63 (100.0%) 63 (100.0%) 

21 .......................................... Mining, Quarrying, and Oil 

and Gas Extraction.

17 (81.0%) 4 (19.0%) 17 (81.0%) 4 (19.0%) 21(100.0%) 

22 .......................................... Utilities .................................. 12 (85.7%) 2 (14.3) 12 (85.7%) 2 (14.3%) 14 (100.0%) 

23 .......................................... Construction ......................... 0 (0.0%) 30 (100.0%) 0 (0.0%) 30 (100.0%) 30 (100.0%) 

31–33 .................................... Manufacturing ....................... 319 (92.2%) 27 (7.8%) 300 (86.7%) 46 (13.3%) 346 (100.0%) 

42 .......................................... Wholesale Trade .................. 22 (31.9%) 47 (68.1%) 15 (21.7%) 54 (78.3%) 69 (100.0%) 

44–45 .................................... Retail Trade .......................... 0 (0.0%) 57 (100.0%) 0 (0.0%) 57 (100.0%) 57 (100.0%) 

48–49 .................................... Transportation and 

Warehousing.

15 (27.8%) 39 (72.2%) 12 (22.7%) 42 (77.8%) 54 (100.0%) 

52 .......................................... Finance and Insurance ........ 0 (0.0%) 16 (100%) 0 (0.0%) 16 (100.0%) 16 (100.0%) 

53 .......................................... Real Estate and Rental and 

Leasing.

10 (41.7%) 14 (58.3%) 6 (25.0%) 18 (75.0%) 24 (100.0%) 

54 .......................................... Professional, Scientific, and 

Technical Services.

3 (6.3%) 45 (93.8%) 3 (6.3%) 45 (93.8%) 48 (100.0%) 

55 .......................................... Management of Companies 

and Enterprises.

0 (0.0%) 2 (100.0%) 0 (0.0%) 2 (100.0%) 2 (100.0%) 

56 .......................................... Administrative and Support 

and Waste Management 

and Remediation Services.

0 (0.0%) 44 (100.0%) 0 (0.0%) 44 (100.0%) 44 (100.0%) 

61 .......................................... Education Services .............. 3 (17.6%) 14 (82.4%) 2 (11.8%) 15 (88.2%) 17 (100.0%) 

62 .......................................... Health Care and Social Assistance.3 (7.7%) 36 (92.3%) 3 (7.7%) 36 (92.3%) 39 (100.0%) 

71 .......................................... Arts, Entertainment, and 

Recreation.

9 (36.0%) 16 (64.0%) 4 (16.0%) 21 (84.0%) 25 (100.0%) 

72 .......................................... Accommodation and Food 

Services.

1 (6.7%) 14 (93.3%) 0 (0.0%) 15 (100.0%) 15 (100.0%) 

81 .......................................... Other services ...................... 5 (11.6%) 38 (88.4%) 4 (9.3%) 39 (90.7%) 43 (100.0%) 

Total 427 (44.7%) 528 (55.3%) 386 (40.4%) 569 (59.6%) 955 (100.0%) 

SBA cannot make a precise 

determination of the number of 

businesses that were approved under 

the alternative size standard for 7(a) or 

CDC/504 Business Loans since the 

enactment of the statutory alternative 


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size standard in 2010 because the 

Agency does not store the data on 

whether an applicant for its 7(a) or CDC/ 

504 Loan Program was qualified under 

its industry-based size standard or 

under the alternative size standard. The 

available data show that alternative size 

standard established by Congress 

enabled some small businesses above 

the industry-based size standards to get 

SBA’s financing. 

As stated elsewhere, SBA also does 

not compile the data on average annual 

receipts, net worth, and net income. The 

only available data on business size is 

the number of employees. SBA 

examined its 7(a) and CDC/504 loan 

data for fiscal years 2021–2022. Based 

on this data, SBA estimates that 500 

recipients of the SBA Business Loans (or 

0.4 percent of the total loans) that 

appeared to have exceeded their 

industry-based size standards were 

granted 7(a) and CDC/504 loans, 

implying that most likely they qualified 

under the statutory alternative size 

standard. Thus, this result indicates that 

the higher alternative size standard 

expanded credit availability to more 

small businesses through SBA’s 7(a) and 

CDC/504 Loan Programs. 

Table 3, Applicant’s Eligibility Under 

the Inflation-Adjusted Statutory 

Alternative and Industry-Based Size 

Standards (FY 2021–2022), shows the 

eligibility of recipients of SBA loans 

through 7(a) and CDC/504 Programs 

during fiscal years 2021–2022 under the 

industry-based and inflation-adjusted 

alternative size standard. More than 

99.5 percent (i.e., 117,327/117,882 = 

0.9953) of loan recipients were found to 

have met both the industry-based size 

standards and inflation-adjusted 

alternative size standard. As in the case 

of the statutory alternative size 

standard, about 500 or 0.4 percent of 

loan recipients that did not meet the 

industry-based size standard met 

inflation-adjusted alternative size 

standard. About 0.1 percent (i.e., 94/ 

117,882 = 0.001) of loan recipients were 

found to have exceeded the interim 

statutory alternative size standard. That 

figure was 0.05 percent (i.e., 54/117,882 

= 0.0005) for the inflation-adjusted 

alternative size standard. Thus, 40 loan 

recipients that did not meet the 

statutory size standard met the inflationadjusted alternative size standard. 

TABLE 3—APPLICANT’S ELIGIBILITY UNDER THE INFLATION-ADJUSTED STATUTORY ALTERNATIVE AND INDUSTRY-BASED

SIZE STANDARDS

[FY 2021–2022] 

Interim statutory alternative size 

standard 

(Table 5) 

Inflation-adjusted alternative size 

standard 

Total 

Meets Does not meet Meets Does not meet 

Industry size standard.Meets .................. 117,288 ............... 81 ........................ 117,327 ............... 42 ........................ 117,369 

Does not meet .... 500 ...................... 13 ........................ 501 ...................... 12 ........................ 513 

Total ................ ............................. 117,788 ............... 94 ........................ 117,828 ............... 54 ........................ *117,882 

* Note: This excludes invalid or incomplete observations in the form of invalid NAICS codes or missing RMA or receipts-to-employee ratios to 

estimate tangible net worth, net income, or receipts equivalent size standard. 

Based on the data for 2017 Economic 

Census, Agricultural Census, and 

County Business Patterns special 

tabulations, SBA estimates that about 

6,275 businesses that are above the 

interim statutory alternative size 

standard will qualify under the 

inflation-adjusted alternative size 

standard. About 25 additional SBA 

Business Loans, totaling up to $50 

million, will be made to these newlyqualified businesses using the higher 

inflation-adjusted alternative size 

standard. That constitutes less than 0.1 

percent of the loan activity during fiscal 

years 2021–2022. These results are 

consistent with results in Tables 7 and 

8 of the July 2023 proposed rule, which 

showed that only a very small fraction 

of the SBA Business Loans and loan 

amount go to businesses that were close 

to the tangible net worth and net income 

thresholds of the statutory size standard. 

Thus, the vast majority of SBA Business 

Loans go to businesses that are 

significantly below the tangible net 

worth and net income thresholds of the 

statutory alternative size standard. 

The 7(a) Loan Program, SBA’s largest 

loan program, includes financial help 

for businesses with special 

requirements. Small businesses can use 

SBA’s 7(a) guaranteed loans for shortand long-term working capital, 

revolving funds based on inventory or 

receivables, fixed assets, and 

refinancing. Small businesses can use 

SBA’s CDC/504 loans for the purchase 

of land, buildings, improvements, and 

equipment. These loans provide longterm, fixed-rate financing to small 

businesses to acquire real estate or 

machinery or equipment for expansion 

or modernization. The CDC/504 loan 

proceeds are generally limited to fixed 

assets and their related soft costs. 

Businesses are often denied SBA’s 

loans for reasons unrelated to the use of 

the loan proceeds, the concern’s ability 

to repay the loan, or other credit-based 

reasons. Rather, they can be denied 

because they exceed the size standards 

for their industries. Some business 

concerns that exceed their industrybased size standards might be eligible 

for SBA’s financial assistance under the 

alternative size standard that this final 

rule adopts. 

Raising the SBG bond guarantee limits 

will increase contracting opportunities 

for more small businesses and bring the 

limits in line with inflation. Due to the 

lack of data, SBA is unable to estimate 

the number of additional small 

businesses that will qualify to apply for 

bonding through the SBG Program for 

non-Federal (e.g., state government, 

local government, private sector, etc.) 

contracting because of increases to bond 

guarantee limits for inflation. Because 

the construction sector accounts for 

more than 95 percent of surety bonds 

and total value of bonded contracts, to 

estimate the number of additional small 

businesses and contracts that will 

qualify for surety bonds on Federal 

contracts, SBA analyzed the small 

business contract awards from FPDS– 

NG for the construction sector for fiscal 

years 2021–2022. These results are 

presented in Table 4, Federal Contracts 

in Construction for Fiscal Years 2021– 

2022. Because of the adopted increase to 

the lower contract limit from $6.5 

million to $9 million, without 

contracting officer’s certification, 

annually up to about 150–155 

additional small businesses will be 

eligible to apply for surety bonds on 

about 175–180 Federal construction 


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contracts totaling between $1.4 billion 

and $1.5 billion in value. Similarly, as 

a result of the adopted increase to the 

upper contract limit from $10 million to 

$14 million, with contracting officer’s 

certification, annually up to about 100– 

110 additional small businesses will be 

eligible to apply for surety bonds on 

110–120 Federal construction contracts 

totaling between $1.3 billion and $1.4 

billion in value. 

TABLE 4—FEDERAL CONTRACTS IN CONSTRUCTION FOR FISCAL YEARS 2021–2022 

Contract limits Number of small 

firms 

Number of 

contracts 

Total contract 

value 

($ billion) 

<= 6.5 million ............................................................................................................. 6,100 25,312 $10.7 

> $6.5 million <= $9 million ....................................................................................... 155 179 $1.4

> 9 million <= $10 million .......................................................................................... 45 45 $0.4 

> $10 million to <= $14 million .................................................................................. 106 115 $1.3 

> $14 million .............................................................................................................. 142 172 $5.3 

Total .................................................................................................................... 6,547 25,822 $19.1 

Raising the contract bond limits could 

lead to larger contracts being guaranteed 

by the SBA and, as a result, could 

increase the risk of program losses. To 

determine if higher contract limits will 

increase the risk of program losses, SBA 

analyzed all claim activity from October 

1, 2020, to March 31, 2023. These 

results are presented in Table 5, Net 

Claims by Contract Size for October 1, 

2020, to March 31, 2023. The results 

show a positive relationship between 

contract size and net claims. For 

example, contracts below $1 million in 

value accounted for nearly 66 percent of 

total claims but accounted for only 29 

percent of net claim amount. On the 

other hand, contracts above $1 million 

in value accounted for 34 percent of 

claims but accounted for 71 percent of 

total net claim amount. Thus, the data 

suggests that higher contract limits may 

lead to larger contracts being 

guaranteed, which in turn may lead to 

an increase in defaults and, as a result, 

higher losses. However, SBA is unable 

to estimate exact losses due to the lack 

of data to estimate the number 

additional surety bonds on non-Federal 

contracts resulting from increases to 

contract bond limits. 

TABLE 5—NET CLAIMS BY CONTRACT SIZE FOR OCTOBER 1, 2020, TO MARCH 31, 2023 

Contract size 

($ million) 

Number of claims Net claim 

Count % Cum. % Amount 

($ million) % Cum. % 

< 0.1 .......................................................................................... 12 5.8 5.8 0.5 0.9 0.9 

0.1 to 0.25 ................................................................................. 32 15.4 21.2 2.3 4.3 5.2 

0.25 to 0.5 ................................................................................. 50 24.0 45.2 4.2 7.9 13.1 

0.5 to 1.0 ................................................................................... 43 20.7 65.9 8.5 16.1 29.3 

1.0 to 2.0 ................................................................................... 44 21.2 87.0 17.7 33.5 62.8 

2.0 to 3.0 ................................................................................... 8 3.8 90.9 5.1 9.6 72.4 

3.0 to 4.0 ................................................................................... 10 4.8 95.7 5.5 10.5 82.9 

4.0 to 5.0 ................................................................................... 7 3.4 99.0 5.0 9.4 92.3 

5.0 to 6.5 ................................................................................... 2 1.0 100.0 4.1 7.7 100.0 

Total ................................................................................... 208 100.0 ........................ 52.7 100.0 ........................

Congressional Review Act 

Subtitle E of the Small Business 

Regulatory Enforcement Fairness Act of 

1996 (codified at 5 U.S.C. 801–808), also 

known as the Congressional Review Act 

or CRA, generally provides that before a 

rule may take effect, the agency 

promulgating the rule must submit a 

rule report, which includes a copy of 

the rule, to each House of the Congress 

and to the Comptroller General of the 

United States. SBA will submit a report 

containing this rule and other required 

information to the U.S. Senate, the U.S. 

House of Representatives, and the 

Comptroller General of the United 

States. A major rule under the CRA 

cannot take effect until 60 days after it 

is published in the Federal Register. 

OMB’s Office of Information and 

Regulatory Affairs has determined that 

this final rule is not a ‘‘major rule’’ as 

defined by 5 U.S.C. 804(2). 

Final Regulatory Flexibility Analysis 

Under the Regulatory Flexibility Act 

(RFA), this final rule may have a 

significant impact on a substantial 

number of small entities. As described 

above, this final rule could affect small 

entities seeking assistance through 

SBA’s (7a) and CDC/504 Loan and SBG 

Programs. 

Immediately below, SBA sets forth a 

final regulatory flexibility analysis 

(FRFA) of this final rule addressing the 

following questions: (1) What is the 

need for, and the objective of, the rule? 

(2) What significant issues were raised 

by the public comments in response to 

the initial regulatory flexibility analysis, 

and what changes were made as a result 

of such comments? (3) What is SBA’s 

response to comments filed by the Chief 

Counsel for Advocacy of the Small 

Business Administration in response to 

the proposed rule, and what changes 

were made as a result of such 

comments? (4) What are SBA’s 

description and estimate of the number 

of small entities to which the rule 

would apply? (5) What are the projected 

reporting, record keeping, and other 

compliance requirements of the rule? (6) 

What steps has SBA taken to minimize 

significant economic impact on small 

entities and why has SBA rejected the 

other significant alternatives to the rule 

in favor of the adopted one? 


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(1) What is the need for, and the 

objective of, the rule? 

Under the Jobs Act, SBA is required 

to adopt an alternative size standard 

using maximum tangible net worth and 

net income for its 7(a) and CDC/504 

Loan Programs. The Jobs Act defined an 

interim statutory alternative standard 

based on tangible net worth of $15 

million and net income of $5 million 

until the SBA Administrator 

permanently designates an alternative 

size standard based on tangible net 

worth and net income for those 

programs. Many businesses that exceed 

their industry-based size standards 

cannot grow and support their 

employees and other businesses that 

depend on them without additional 

capital from SBA’s financial assistance 

programs. The inflation-adjusted 

alternative size standard adopted under 

this final rule will enable such 

businesses to qualify for SBA’s 7(a) and 

CDC/504 Loan Programs. 

Section 3(a) of Small Business Act (15 

U.S.C. 632(a)) gives the SBA’s 

Administrator responsibility to establish 

and change small business size 

standards. Within its administrative 

discretion, SBA implemented a policy 

in its regulations to review the effect of 

inflation on size standards at least once 

every five years (13 CFR 121.102(c)) and 

make any changes as appropriate. SBA 

has adjusted its monetary-based size 

standards three times since the 

enactment of the interim statutory 

alternative size standard in 2010. 

However, SBA did not adjust the 

statutory alternative in each of those 

adjustments. Inflation, as measured by 

the change in GDP price index, has 

increased more than 34 percent since 

2010. This has eroded the value of the 

statutory alternative size alternative in 

real terms. Consequently, many 

businesses above their industry-based 

size standards and in need of financial 

assistance from SBA’s 7(a) or CDC/504 

Loan Programs may have exceeded the 

statutory alternative size standard and 

lost eligibility for benefits of those 

programs. The inflationary adjustment 

of the statutory alternative size standard 

in this final rule will enable such 

businesses to qualify for those programs. 

The alternative size standard applies 

uniformly across all industries and does 

not affect existing size standards by 

industry. Rather it supplements them, 

by making more financing available to 

otherwise ineligible businesses that 

exceed their industry-based size 

standard. 

Regarding the SBG Program, NDAA 

2013 increased the SBG guarantee limit 

to $6.5 million, and up to $10 million 

for a Federal contract if a Federal 

contracting officer certifies that such a 

guarantee is necessary. The Act also 

included a provision to increase the 

$6.5 million limit periodically for 

inflation in accordance with 41 U.S.C. 

1908. Based on the CPI, inflation has 

increased more than 30 percent since 

2013. SBA has not adjusted its bonding 

limits since 2013. This has eroded the 

value of the bonding limits in real terms 

since the limits were set by Congress in 

2013. This has adversely impacted small 

business contractors seeking bonding 

assistance from the SBA SBG Program. 

The adjustment of the SBG contract 

limits will bring them in line with 

ongoing inflation and current 

contracting trends and increase 

contracting opportunities to small 

businesses. 

(2) What significant issues were raised 

by the public comments in response to 

the initial regulatory flexibility analysis, 

and what changes were made as a result 

of such comments? 

SBA received 13 comments on the 

July 2023 proposed rule from various 

trade associations, businesses, and 

individual stakeholders, of which 11 

comments supported SBA’s proposed 

changes and two comments were not 

applicable or were outside the scope of 

SBA’s proposed rule. Generally, 

commenters expressed strong support 

for SBA’s proposed changes, without 

reservation. Thus, with due 

consideration of all public comments, as 

discussed in detail in Section IV of this 

final rule, and in light of the overall 

strong support for SBA’s proposed 

changes and anticipated impacts, SBA is 

adopting the proposed adjustments in 

the July 2023 proposed rule without 

change. Specifically, SBA is adopting 

the statutory alternative size standard of 

$15 million in tangible net worth and $5 

million in net income as the permanent 

alternative size standard, subject to 

adjustment for inflation that has 

occurred since the establishment of the 

statutory alternative size standard in 

2010. The inflation adjustment increases 

the size standard’s level for tangible net 

worth to $20 million and for net income 

to $6.5 million. SBA is also adopting, as 

proposed, the inflation-adjusted 

thresholds applicable to the statutory 

limits for contract size under the SBG 

Program. The adjustment increases the 

contract limit to $9 million and to $14 

million for Federal contracts if a Federal 

contracting officer certifies that such a 

guarantee is necessary. The statutory 

responsibility for adjusting the size 

standard for inflation lies with the 

Federal Acquisition Regulation. In the 

absence of FAR action, SBA will adjust 

the SBG contract limits on the same 

five-year schedule that SBA currently 

uses for reviewing its monetary-based 

industry size standards in accordance 

with 13 CFR 121.102(c). 

(3) What is SBA’s response to comments 

filed by the Chief Counsel for Advocacy 

of the Small Business Administration in 

response to the proposed rule, and what 

changes were made as a result of such 

comments? 

SBA did not receive public comments 

filed by the Chief Counsel for Advocacy 

of the Small Business Administration in 

response to the proposed rule. As such, 

no changes were made to the rule in 

response to such comments. 

(4) What are SBA’s description and 

estimate of the number of small entities 

to which this rule would apply? 

This rule will apply to more than 8.1 

million employer firms, of which 98.2 

percent are small under industry-based 

size standards and 92.5 percent are 

small under the interim statutory 

alternative size standard. About 92.6 

percent of firms will qualify as small 

under the inflation-adjusted alternative 

size standard. About 6,275 firms that are 

above the interim statutory alternate 

size standard will qualify as small under 

the inflation-adjusted size alternative 

standard. That is less than 0.1 percent 

of firms that are small under the interim 

statutory alternative size standard. 

For the reasons discussed under the 

Regulatory Impact Analysis section of 

this rule, because of lack of relevant 

data (e.g., receipts, tangible net worth, 

and net income of loan recipients), SBA 

cannot precisely state the number of 

businesses that were approved under 

the alternative size standard for 7(a) or 

CDC/504 loans and the number of 

newly-defined small businesses that 

will qualify under the inflation-adjusted 

alternative size standard for loans under 

these programs. However, based on the 

analysis of the available data for fiscal 

years 2021–2022, SBA estimates that at 

least 500 7(a) or CDC/504 loans (or 0.4 

percent of total loans) were likely 

approved under the alternative size 

standard. 

With respect to the SBG program, 

more than 95 percent of the bonding 

activity is concentrated in the 

construction sector. Based on the 2017 

Economic Census, there are 689,260 

small employer firms in construction to 

which this rule will apply. 

Additionally, about 2.5 percent of the 

bonding activity occurs in 11 industries 

in Sector 56 with more than 209,000 

small firms in those industries to which 

this rule will also apply. More small 

businesses will qualify to apply for 


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11712 Federal Register / Vol. 89, No. 32 / Thursday, February 15, 2024 / Rules and Regulations 

surety bonds as a result of adopted 

increases to statutory bonding limits. 

(5) What are the projected reporting, 

record keeping, and other compliance 

requirements of the rule? 

A new size standard does not impose 

any additional reporting, record 

keeping, or compliance requirements on 

small entities. Revising size standards 

alters the access to SBA programs that 

assist small businesses, but does not 

impose a regulatory burden as the size 

standards neither regulate nor control 

business behavior. 

(6) What steps has SBA taken to 

minimize significant economic impact 

on small entities and why has SBA 

rejected the other significant 

alternatives to the rule in favor of the 

adopted one? 

There are no alternatives to 

establishing a size standard for the 

Agency’s 7(a) and CDC/504 Loan 

Programs based on an applicant’s 

tangible net worth and net income 

because this is a statutory requirement. 

Specifically, the Jobs Act directs the 

Agency to use a firm’s tangible net 

worth of not more than $15 million and 

average net income after Federal income 

taxes (excluding any carry-over losses) 

for the two full fiscal years immediately 

before its application of not more than 

$5 million until the Administrator 

adopts a different, permanent 

alternative size standard based on net 

worth and net income measures. SBA 

may propose to adopt a higher or lower 

alternative size standard based on an 

applicant’s tangible net worth and net 

income, however, SBA’s proposed 

alternative size standards, as detailed in 

the July 2023 proposed rule, were 

strongly supported by commenters, 

including trade associations small 

businesses and individuals. Thus, in 

this final rule, SBA is adopting the 

interim statutory alternative size 

standard as a permanent alternative size 

standard, subject to adjustment for 

inflation that has occurred since the 

standard’s establishment in 2010. 

Executive Order 13563 

A description of the need for this 

regulatory action and its associated 

benefits and costs associated with this 

action, including possible impacts that 

relate to Executive Order 13563 are 

included above in the Regulatory Impact 

Analysis. This final rule will further 

expand the benefits of the Jobs Act 

which also increased the upper limits of 

loans available under the 7(a) and CDC/ 

504 Loan Programs, without restricting 

access and availability to qualified 

entities. SBA’s changes to the SBG 

statutory contract limits will increase 

contracting opportunities to small 

businesses. 

Executive Order 12988 

This action meets applicable 

standards set forth in sections 3(a) and 

3(b)(2) of Executive Order 12988, Civil 

Justice Reform, to minimize litigation, 

eliminate ambiguity, and reduce 

burden. This rule does not have 

retroactive or preemptive effect. 

Executive Order 13132 

For purposes of Executive Order 

13132, SBA has determined this 

rulemaking will not have substantial, 

direct effects on the States, on the 

relationship between the National 

Government and the States, or on the 

distribution of power and 

responsibilities among the various 

levels of government. Therefore, SBA 

has determined that this final rule has 

no federalism implications warranting 

preparation of a federalism assessment. 

Paperwork Reduction Act 

For the purpose of the Paperwork 

Reduction Act, 44 U.S.C. Ch. 35, SBA 

has determined that this rulemaking 

will not impose any new reporting or 

recordkeeping requirements. 

List of Subjects 

13 CFR Part 115 

Claims, Reporting and recordkeeping 

requirements, Small businesses, Surety 

bonds. 

13 CFR Part 121 

Administrative practice and 

procedure, Government procurement, 

Government property, Grant programs— 

business, Individuals with disabilities, 

Loan programs—business, Reporting 

and recordkeeping requirements, Small 

businesses. 

For the reasons set forth in the 

preamble, the Small Business 

Administration amends 13 CFR part 115 

and 13 CFR part 121 as follows: 

PART 115—SURETY BOND 

GUARANTEE 

■ 1. The authority citation for part 115 

continues to read as follows: 

Authority: 5 U.S.C. app 3; 15 U.S.C. 636i, 

687b, 687c, 694a, and 694b note. 

■ 2. Amend § 115.10 by revising the 

definition of ‘‘Applicable Statutory 

Limit’’ to read as follows: 

§ 115.10 Definitions. 

* * * * * 

Applicable Statutory Limit means the 

maximum amount, set forth below, of 

any Contract or Order for which SBA is 

authorized to guarantee, or commit to 

guarantee, a Bid Bond, Payment Bond, 

Performance Bond, or Ancillary Bond: 

(1) $9 million (as adjusted for 

inflation in accordance with 41 U.S.C. 

1908). 

(2) $14 million if a contracting officer 

of a Federal agency certifies, in 

accordance with section 115.12(e)(3), 

that such guarantee is necessary. 

(3) If SBA is guaranteeing the bond in 

connection with a procurement related 

to a major disaster pursuant to section 

12079 of Public Law 110–246, see 

section 115.12(e)(4). 

* * * * * 

■ 3. Amend § 115.12 by revising 

paragraph (e)(3) to read as follows: 

§ 115.12 General program policies and 

provisions. 

* * * * * 

(e) * * * 

(3) Federal Contracts or Orders in 

excess of $9,000,000 (as adjusted for 

inflation in accordance with section 

1908 of title 41, United States Code). 

SBA is authorized to guarantee bonds 

on Federal Contracts or Orders greater 

than $9,000,000 (as adjusted for 

inflation in accordance with 41 U.S.C. 

1908), but not exceeding $14 million, 

upon a signed certification of a Federal 

contracting officer that the SBA 

guarantee is necessary. The certification 

must be either express mailed to SBA, 

Office of Surety Guarantees, 409 Third 

Street SW, Washington, DC 20416 or 

sent by email to suretybonds@sba.gov, 

and include the following additional 

information: 

(i) Name, address and telephone 

number of the small business; 

(ii) Offer or Contract number and brief 

description of the contract; and 

(iii) Estimated Contract value and date 

of anticipated award determination. 

* * * * * 

PART 121—SMALL BUSINESS SIZE 

REGULATIONS 

■ 4. The authority citation for part 121 

continues to read as follows: 

Authority: 15 U.S.C. 632, 634(b)(6), 

636(a)(36), 662, and 694a(9). 

■ 5. Amend § 121.301 by revising the 

introductory text of paragraphs (a), (b), 

(b)(2), and paragraph (e) to read as 

follows: 

§ 121.301 What size standards and 

affiliation principles are applicable to 

financial assistance programs? 

* * * * * 

(a) For Business Loans (other than for 

7(a) Business Loans) and for Disaster 

Loans (other than physical disaster 


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Federal Register / Vol. 89, No. 32 / Thursday, February 15, 2024 / Rules and Regulations 11713 

loans), an applicant business concern 

must satisfy two criteria: 

* * * * * 

(b) For 7(a) Business Loans and 

Development Company programs, an 

applicant business concern must meet 

one of the following standards: 

* * * * * 

(2) Including its affiliates, tangible net 

worth not in excess of $20 million, and 

average net income after Federal income 

taxes (excluding any carry over losses) 

for the preceding two completed fiscal 

years not in excess of $6.5 million. 

* * * 

* * * * * 

(e) The applicable size standards for 

purposes of SBA’s financial assistance 

programs, excluding the Surety Bond 

Guarantee assistance program, are 

increased by 25 percent whenever the 

applicant agrees to use all of the 

financial assistance within a labor 

surplus area. The U.S. Department of 

Labor (DOL) issues the Labor Surplus 

Area (LSA) list on a fiscal year basis on 

its website at www.dol.gov/agencies/eta/ 

lsa. 

* * * * * 

Isabella Casillas Guzman, 

Administrator. 

[FR Doc. 2024–02776 Filed 2–14–24; 8:45 am] 

BILLING CODE 8026–09–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2023–0933; Project 

Identifier MCAI–2022–00554–T; Amendment 

39–22666; AD 2024–02–02] 

RIN 2120–AA64 

Airworthiness Directives; De Havilland 

Aircraft of Canada Limited (Type 

Certificate Previously Held by 

Bombardier, Inc.) Airplanes 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Final rule. 

SUMMARY: The FAA is adopting a new 

airworthiness directive (AD) for certain 

De Havilland Aircraft of Canada Limited 

Model DHC–8–401 and –402 airplanes. 

This AD was prompted by reports that 

the saddle washer (radius filler) for the 

front and rear spar joints may have been 

incorrectly manufactured for several 

years. This AD requires inspecting the 

horizontal stabilizer to vertical joint for 

gaps and bending of the saddle washer 

and adjacent washers, and replacing 

parts if necessary. The FAA is issuing 

this AD to address the unsafe condition 

on these products. 

DATES: This AD is effective March 21, 

2024. 

The Director of the Federal Register 

approved the incorporation by reference 

of a certain publication listed in this AD 

as of March 21, 2024. 

ADDRESSES: 

AD Docket: You may examine the AD 

docket at regulations.gov under Docket 

No. FAA–2023–0933; or in person at 

Docket Operations between 9 a.m. and 

5 p.m., Monday through Friday, except 

Federal holidays. The AD docket 

contains this final rule, the mandatory 

continuing airworthiness information 

(MCAI), any comments received, and 

other information. The address for 

Docket Operations is U.S. Department of 

Transportation, Docket Operations, M– 

30, West Building Ground Floor, Room 

W12–140, 1200 New Jersey Avenue SE, 

Washington, DC 20590. 

Material Incorporated by Reference: 

• For service information identified 

in this final rule, contact De Havilland 

Aircraft of Canada Limited, Dash 8 

Series Customer Response Centre, 5800 

Explorer Drive, Mississauga, Ontario, 

L4W 5K9, Canada; telephone 855–310– 

1013 or 647–277–5820; email thd@

dehavilland.com; website 

dehavilland.com. 

• You may view this service 

information at the FAA, Airworthiness 

Products Section, Operational Safety 

Branch, 2200 South 216th Street, Des 

Moines, WA. For information on the 

availability of this material at the FAA, 

call 206–231–3195. It is also available at 

regulations.gov under Docket No. FAA– 

2023–0933. 

FOR FURTHER INFORMATION CONTACT: 

Yaser Osman, Aviation Safety Engineer, 

FAA, 1600 Stewart Avenue, Suite 410, 

Westbury, NY 11590; telephone 516– 

228–7300; email 9-avs-nyaco-cos@

faa.gov. 

SUPPLEMENTARY INFORMATION: 

Background 

The FAA issued a notice of proposed 

rulemaking (NPRM) to amend 14 CFR 

part 39 by adding an AD that would 

apply to certain De Havilland Aircraft of 

Canada Limited Model DHC–8–401 and 

–402 airplanes. The NPRM published in 

the Federal Register on April 19, 2023 

(88 FR 24144). The NPRM was 

prompted by AD CF–2022–21, dated 

April 21, 2022, issued by Transport 

Canada, which is the aviation authority 

for Canada (referred to after this as the 

MCAI). The MCAI states that certain 

saddle washers for the front and rear 

spar joint may have been incorrectly 

manufactured for several years. Nonconforming saddle washers could 

potentially become deformed when 

installed, and lead to gaps at the 

horizontal stabilizer to vertical stabilizer 

joint, that would result in reduction of 

the pre-load at the joint. 

In the NPRM, the FAA proposed to 

require inspecting the horizontal 

stabilizer to vertical joint for gaps and 

bending of the saddle washer and 

adjacent washers, and replacing parts if 

necessary. The FAA is issuing this AD 

to address gapping and bending of the 

saddle washer that could have the 

potential to reduce the life of the bolt, 

which in turn could affect the structural 

integrity of the horizontal stabilizer to 

vertical stabilizer joint. 

You may examine the MCAI in the 

AD docket at regulations.gov under 

Docket No. FAA–2023–0933. 

Discussion of Final Airworthiness 

Directive 

Comments 

The FAA received a comment from 

the Air Line Pilots Association, 

International (ALPA). ALPA supported 

the NPRM without change. 

The FAA received additional 

comments from De Havilland Aircraft of 

Canada Limited. The following presents 

the comments received on the NPRM 

and the FAA’s response to each 

comment. 

Request To Refer to New Service 

Information 

De Havilland Aircraft of Canada 

Limited requested that the FAA revise 

the proposed AD to refer to De 

Havilland Aircraft of Canada Limited 

Service Bulletin 84–55–12, Revision B, 

dated April 20, 2023. De Havilland 

Aircraft of Canada Limited noted that 

the service information had been 

updated since the NPRM was released. 

The FAA agrees with the request. De 

Havilland Aircraft of Canada Limited 

Service Bulletin 84–55–12, Revision B, 

dated April 20, 2023, provides clarity on 

service information that may be used to 

do rework if there are gaps in the new 

radius fillers (saddle washers), and 

specifies an additional radius filler part 

number. The FAA has revised this AD 

to refer to De Havilland Aircraft of 

Canada Limited Service Bulletin 84–55– 

12, Revision B, dated April 20, 2023. 

The FAA has also revised paragraph (i) 

of this AD to provide credit for De 

Havilland Aircraft of Canada Limited 

Service Bulletin 84–55–12, Revision A, 

dated February 16, 2022. 

Request To Revise Corrective Actions 

De Havilland Aircraft of Canada 

Limited requested that the FAA revise 

paragraph (h) of the proposed AD. The 


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